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Financial Markets… Italian government bonds rose for a second day, with the benchmark 10-year yield sliding 6 basis points to 4.75%, upon speculation of a broad government coalition after inconclusive election results and that the ECB would provide support if the situation warranted. Spanish and Portuguese bonds also advanced, with 10-year yields dropping 9 bps to 5.15% and 16 bps to 6.32%, respectively.

Developing-country stocks gained the most in four weeks on Thursday, with the benchmark MSCI Emerging Market Index trimming this month’s loss to 1.4%, supported by a rally in Asia. China’s Shanghai Composite Index climbed 2.3% and South Korea’s Kospi gained 1.1%. Elsewhere, the Philippines Stock Exchange Index advanced 1.6% to a record, while Vietnam’s VN index added 1.9%, the most since February 6.

Argentina said it will not pay $1.3 billion to a group of minority bondholders stemming from the nation’s 2002 default even if ordered by a U.S. appeals court. The country defaulted on about $100 billion in sovereign debt 11 years ago, and about 92% of its creditors had agreed to lower restructured debt payments. Last November, however, the New York district court ordered Argentina not to make a payment on restructured debt, unless the holdout creditors are paid as well.

High-income Economies…The second estimate of US GDP in Q4 2012 shows that the economy expanded by 0.1% (q/q annualized) compared to the 0.1% drop originally reported, reflecting a boost from private consumption and fixed investment that was partly offset by negative contributions from government spending, inventory investment and exports. The pace of growth was nevertheless the weakest since Q1 2011 and down from 3.1% in Q3 2012. Separately, the four week moving average of initial jobless claims, an indication of layoffs, fell for the third week in a row by a seasonally adjusted 6,750 to 355,000.

Consumer spending in France fell by 0.8% (m/m sa) in January, after growing 0.2% the preceding month. With unemployment climbing towards record highs, spending has weakened in recent months.

Credit in the Eurozone remains tight with an ECB report showing that loans to the private sector fell by 0.9% (y/y) in January, following a 0.7% drop in December. The decline was led by slightly sharper drop in loans to non-financial corporations of 2.5% in January, from -2.3% in December, and deepening credit contractions in Spain and Italy.

Japan’s industrial production rose by 1.1% (3m/3m, sa) in the 3 months to January after posting steep declines in the previous 8 months, helped by a recovery in transport and electronics sectors. On an annual basis, output fell by 6.5% (y/y) in January, about the same as in December.

Developing Economies…Europe and Central Asia: Croatia’s GDP fell 2.3% (y/y) in Q4 2012, as personal consumption, investment and industrial production declined. The economy shrank 2 percent last year, after stagnating in 2011 and contracting in the two previous years.

Latin America and the Caribbean: Chile’s industrial production rebounded 4.5% (y/y) in January from a decline of 2.5% (y/y) in December led by rising food, medicine and metals output.

Middle East and North Africa: Egypt’s budget deficit is up 36.0% for the first seven months of the fiscal year that started in July 2012 and has reached USD18.0 billion, over the same period of the previous fiscal year, led by rising wages, subsidies and interest payments. The deficit is expected to come in around 10-11% of GDP for the entire fiscal year despite an increase in tax revenues.

South Asia: India's GDP growth slowed to 4.5% (y/y) during three months ended December, from 5.3% (y/y) in the quarter before due to the widespread weakness in farm, mining and manufacturing output.

Sub-Saharan Africa: Kenya’s inflation accelerated in February to 4.5% (y/y), up from 3.7% in January and a 25-month low of 3.2% in December. The increase continues to be driven by food and non-alcoholic beverages prices.

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